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Reno Industrial Real Estate

March 21, 2010 By

Reno industrial real estate is driven by its location next to the Interstate 80 (I-80). This has given rise to a disproportionately large industrial sector for an area the size of Reno-Sparks. Reno has become a major hub feeding the high tech industries in the Bay area.

Interstate 80 (I-80) is the second-longest Interstate Highway in the United States (after I-90). It connects downtown San Francisco, California, to Teaneck, New Jersey, a suburb of New York City. In the state of Nevada, Interstate 80 runs northeast from the Lake Tahoe region near Reno to Battle Mountain. At Battle Mountain, it turns east to the salt flats of Utah via Elko. In Nevada, I-80 is routed along the Truckee and Humboldt rivers.

The I-80

interstate-i-80-reno-industrial-real-estate

The stretch of I-80 through Nevada is largely desolate and mountainous. Services are limited compared to I-80 in other states. Despite being an important trade route the I-80 closes 14 times between November and March.

Related article: Las Vegas Industrial Real Estate

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$11bn Hit to Clark County’s Taxable Base

March 16, 2010 By

In early March legislators finally filled the $887 million Nevada state budget shortfall, however, this is just a temporary measure to see the state through to 2011, and falling property values are impacting tax collections. Clark County has taken a $435 million hit on property taxes so far this year as a result of appeals being filed in relation to Clark County tax assessment rates.

Whilst many individual home owners are getting in on the act it is really the casinos and other commerical property owners that are having the biggest impact. Las Vegas Hilton’s assessed property value was dropped from $285 to $120 million, and Aliante’s was more than halved from $117 to $45 million. Even established communities in places such as Henderson are being impacted.

All 80 tax districts are facing the same problems, with 8,300 owners having filed appeals with the assessor’s office this year, compared to just 725 in 2007. In total the county is looking at a reduction of $11 billion in its taxable base. With just $16.2 billion of property values left to tax, and massive pressures on government spending, how long can Nevada continue without restructuring its tax system?

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Nevada Doubles Up on Apartment Debt

March 16, 2010 By

Apartment complexes in Nevada, including apartments in Northwest Las Vegas, are way behind on their loans: 25% of multifamily units that have been packaged as commercial mortgage-backed securities (CMBS) are in arrears. As with foreclosures Las Vegas is leading the nation, which averages 13% in arrears for apartment-backed CMBS.

With arrears running at double the national average many cash-rich investors have flocked to Las Vegas only to find that the distress is yet to translate into a flood of deal flow. Institutional money that chases apartment complexes of 100 units or more saw just 11 deals of that size in 2009, versus 17 in 2008 and 42 in 2007. It seems that banks are holding onto these assets and operating as landlords in the expectation that rents, and thus values, will rise. In established areas such as Summerlin, banks are even more reluctant sellers.

One market that is seem more trading are fourplexes, which saw 416 sold in 2009 versus 209 in 2008. The price per unit for complexes sold in Las Vegas was $40,300 in 2009 – a 44% decline on 2008. But with a 25% vacancy rate, and rents down by the same percentage the only way to generate decent yields right now is to buy below build cost, and these are terms that the current owners (banks in a lot of cases) continue to resist.

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Nevada State Budget

March 3, 2010 By

Legislators finally filled the $887 million Nevada state budget shortfall today, but this is just a temporary measure to see the state through to 2011. What needs to be addressed before 2011 rolls around is the fact that taxes either need to be raised on gaming on mining, or tax revenue sources are going to have to be diversified.

Given the state of the casino industry, which is in the throes of major financial restructuring, it seems any increases in the sector could be counter-productive. The mining industry is likely to resist pressure to take on a disproportionate burden, and the other major contributor of sales tax will only start picking up once the broader economy does.

In short Nevada needs to broaden its tax base or face a financial crisis.  Without changing the tax structure future deficits are likely to exceed $887 million, and further budget cuts could lead to serious social issues. One of the simplest solutions would be the introduction of corporate taxes on all businesses, but this would not go down well with the businesses that located in the state because of its tax-advantaged status.

One way to look at the situation is to say that Nevada does not have a problem, it is the rest of the economy that does. However, until the broader economy picks up, and the tourist dollars start flowing back in, the casinos will struggle, and the state needs to diversify its tax base. How successfully it does this could have a long-term impact on property values. Developments like Lake Las Vegas are already fragile, so the politicians must make changes in the Nevada state budget that boost rather than depress the real estate market.

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